an idc infobrief, sponsored by dxc | january 2018 · added through e-commerce channels. but look at...

An IDC InfoBrief, Sponsored by DXC | January 2018

Digital Transformation Boosts Retail Customer Experience

http://www.idc.com

IDC Infobrief | Digital Transformation Boosts Retail Customer Experience

Sponsored by DXC |

About This InfoBriefThe data presented in this InfoBrief comes from a web-based survey of 62 (general merchandise and retail focused on specific product categories like home improvement and apparel) North American retailers conducted in November 2017.

The target respondents were key decision makers knowledgeable about their organization’s retail operations, and have a decision-making role in their organization’s digital transformation (DX) strategy. The retailers that qualified for the survey had 2016 revenue of $500M-plus, which represents just over 10 percent of the 601 firms in North America (source: D&B).

The objective of the survey was to gain understanding on the impact of analytics across the full customer journey and investigate how retailers will use the data and prepare themselves to meet the changing landscape of shoppers, technologies and platforms.

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CX DX transformation isn’t a journey to a fixed end state. It’s transforming the end state with every step.

CX DX is Mainstream and Has Momentum

But It’s Early Days, Not Yet Mature

Customer Experience Digital Transformation Is Already Mainstream But Still Immature

79% 45% 72% 10% 8%have a stated executive level

CX DX strategy underwayhave had a DX strategy for three years or more

are opportunistic and aren’t truly innovating

lead their peers with digital experiences and...

...are disrupting markets and creating new ones

COOs, CEOs, CFOs, AND CIOs LEAD THESE EFFORTS

6% SEE DX AS JUST PART OF HOW THEY DO BUSINESS

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The store isn’t dead! The store—albeit a much-transformed one—remains at the center of solid omni-channel retailing practice. How, when, and where consumers want to shop, what they want to buy, and how much they’re willing to pay are all changing. Retailers that can’t keep up with these changes—and transform their stores accordingly—are failing.

Stores Remain Strategically Critical

stores closed in the U.S. nine months of 2017.

Store openings (note: led by Dollar stores, discount grocery (Lidl and Aldi), offprice retail lead (TJX, Five Below, Ross Stores and Ulta))

“Reports of my death are greatly exaggerated.” — Mark Twain

6,700

3,400

RETAILERS FILED FOR BANKRUPTCY IN THE FIRST SIX

MONTHS OF 2017.

300

rank omni-channel commerce and supply chain as top-three assets. Both complement store operations44%

see their store formats and chain brands as one of their top three assets for DX—more than any other asset56%

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The store is taking on a new BUT no less important role at the beginning or middle of the path to purchase. 98% report that beginning or middle of the path to purchase store traffic is up.

Important Steps on the Path to Purchase: Exploration and Experience

47 45 8

337

23

60

77

Conversion rates

n Increase n No change n Decrease

$ per transaction

Number of transactions per store

How have each of the following store metrics changed in the past 12-18 months?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Total store traffic is up for 85% of retailers surveyed. So are conversion rates, transaction value, and number of transactions.

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Sponsored by DXC | (Source for data below: Source: Retail Indicators Branch, U.S. Census Bureau, Last Revised: November 17, 2017) See: https://www.census.gov/retail/index.html#ecommerce

U.S. retail third quarter sales increased by $52 billion, 2017 compared to 2016. Stores accounted for 70% of that growth, $36 billion, compared to the $16 billion added through e-commerce channels. But look at the increase in e-commerce sales. It’s mostly a two-way story between Amazon’s 42% and omni-channel retailers’ 35%. They already account for 70% of total retail sales growth through their stores. Pure-play e-commerce retailers own just 23% of online sales.

Omni-channel Stores Drive Retail Sales

Shares of dollar growth of retail sales

Stores ($368) 70%

E-Commerce ($16B) 30%

Shares of growth of e-commerce sales

E-commerce retailers ($3,589)

23%

Omni-channel retailers ($5,384)

35%

Amazon ($6,497)

42%

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Retailers are focusing store strategy priorities on transforming how they support superior customer experience—customer service, “in store only” promotions, and in store classes and demonstrations, and less so on their omnichannel aspects.

Retailers Focus on Transforming Stores to Support Customer Experience

Improving in-store customer serviceIncreasing ‘only available in-store’ promotions and merchandise

Making stores more attractive with activities such as classes, demonstrations, events

Rationalized assortments, e.g., space, SKUs and styles displayed in-store

Optimizing labor hours for the right mix of cost savings, customer service, and sales

Shop online/pickup in store processes

Running stores as online fulfillment centers

Improving in-store mobile personalization

Connecting in-store assortments with online endless aisle assortments

19%

5%

7%

8%

8%

11%

13%

18%

Which of the following do you anticipate will be most important to your store strategy in the next 12-18 months

in response to changes in customer behavior?

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Stores That Don’t Transform Are at Risk of Losing Sales

Amazon and other online marketplaces will gain nearly 2 basis points, from 20% to 22% of total sales

Most of these sales will shift to the retailer’s other channels—website and mobile apps

of their current level or six basis points (41.8% to 35.8%)15%

42%

20%

27%

11%

36%

22%

30%

12%

In stores Amazon and other online marketplace

Your own website Your own mobile app

n Last 12-18 months n Next 12-18 months

Percentage of sales transactions that were conducted and that you expect will be conducted through the following channels

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Retailers Must Focus on Their Omni-Channel Shoppers to Grow RevenueWhat percentage more do multi-channel shoppers typically spend compared to store-only shoppers?

0%

1% - 2% 3% - 4% 5% - 6% 7% - 10% 11% - 15% 16% - 20% 20%+

1009080706050403020100 10%

21%

38%

24%

0%7%

Mean: 9.24%Median: 8.5%

What percentage of your customers are multi-channel shoppers, meaning they make purchases in two or more channels— stores,

ecommerce, mobile phones, and maybe through call centers?

3%

Up to 5% 6% to 10% 11% to 20% 21% to 30% 30% +

120

100

80

60

40

20

0

35%

45%

10%7%

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Sponsored by DXC |

According to retailers, they are ahead of competitors on improving in-store experiences, in particular with mobile personalization and making stores more attractive.

The Capabilities Race is Underway

About 40% to 60% think they’re on par vs competitors across the nine dimensions. Of the rest, about twice as many think they are ahead of their competitors.

Improving in-store customer service

Improving in-store mobile personalization

Making stores more attractive with activities such as classes, demonstrations, events

Increasing ‘only available in-store’ promotions and merchandise

Running stores as online fulfillment centers

Rationalized assortments, e.g., space, SKUs and styles displayed in-store

Shop online/pickup in store processes

Optimizing labor hours for the right mix of cost savings, customer service, and sales

Connecting in-store assortments with online endless aisle assortments

18%

18%

24%

21%

11%

13%

19%

15% 58%

53% 26%

27%

29%

29%

31%

32%

36%

40%

42%

52%

58%

58%

47%

40%

42%

40%

21%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Please indicate how your organization compares to its competitors in each of the following areas.

n Lagging in relation to our competitors n On par with our competitors n Ahead of our competitors

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The Capabilities Race is Underway (cont.)Few retailers are ahead in all

nine capabilities

Ahead in 8 or 9 capabilities

6%

Ahead in 5 to 7 capabilities

19%

Ahead in 4 or fewer capabilities

75%

Store associate empowerment

Click and collect: Buy online pick up in store

(Near) real-time inventory visibility/availability

Send sale – buy in current store – reserve/ship from site

Clienteling/personal shopper-advisor

Real-time in store engagement and behavior analysis

Customer order fulfillment automation

Cross channel returns

58%

58%

57%

53%

50%

47%

47% 47%

53% 10%

7%

18%

18%

10%

7%

11%

5%

36%

32%

37%

37%

31%

37%

37%0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Rapid Increase in Store-Related Initiatives

n Currently n Plan in 12-18 months n No plans

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Retailers wrestle with a variety of obstacles to their digital transformation efforts. Top challenges are employee capabilities, data integration and integrity, and non-integrated business processes.

People, Data, and Processes Loom as Most Common ChallengesObstacles to Transformation

Employee capability

Data integration/integrity

Related non-integrated/undefined business processes

Market conditions

Geographical span

Investment/capital

Internal change management

Foundational operational systems (ERP, POS, ecommerce)

Understanding of customer behavior

43%

33%31%

27%

33%35%35%

37%41%

What are the biggest obstacles/hurdles in achieving goals/execution of digital strategy at your organization?

Most retailers need only focus on three or fewer obstacles

5 or more of 9, 10%

4 of 9, 22%

3 of 9, 35%

2 of 9, 16%

1 of 9, 16%

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Overwhelmingly, 86% say that abilities in customer data, associated data science, and advanced analytics are one of their top three strategic assets for digital transformation.Customer data is cited as a strategic asset by far and away more retailers compared to other data domains. Of note, second most cited strategic asset, digital marketing, is highly dependent on customer insight. In fact, it’s appropriate to see them as two sides of the same coin.

DX Leaders Focus DX Data and Analytics on Day-to-Day DecisionsRetailers with a stated executive level CX DX strategy are bringing DX data to bear on day-to-day decisions in operations—supply chain, stores, and merchandising.

Fewer retailers are applying DX to marketing, but still it’s 43%. Why the focus on operations? Superior operations deliver the brand promise. Rising consumer expectations, increasing risk of defection, and unfolding complexities of next-generation retail raise the threshold of differentiating on execution.

Customer Data Is Strategic Asset for DX

Supply chain

Store operations

Merchandise operations

Marketing

Finance/Admin

71%

12%43%

61%67%

What types of data from digital transformation (DX) initiatives are being used in your day to day decision making?

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Volumes are being driven by data generated by loyalty programs, website browsing, mobile and app interactions, store sensor data, purchase transactions, and other digital interactions with shoppers.

Customer Data Volumes Are Exploding...

Successful Digital Transformation Depends on Data Mastery

5%

32%

7%

21%

34%

2%No change

compared to 3 years ago

5X 100X2X 10X 1000X

What’s your best estimate of how much more customer data, now compared to three years ago, is being generated inside your enterprise by your loyalty programs, website browsing, mobile and app interactions, store sensor data, purchase transactions, and other digital interactions with shoppers? Please answer in terms of the amount of data generated, whether or not you analyze or even store the data.

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…And Too Much Time Is Already Wasted on Wrangling Data

What percentage of their time do you estimate your line of business (LOB) managers typically spend improving data consistency, quality and integrity?

>5% 5% - 9% 10% - 19% 20% - 29% 30% - 39% 40% - 49% 50%+

1009080706050403020100

13%

34%

29%

11%

5%6%

2%

http://www.idc.com


Sponsored by DXC |

A lot of retailers must contend with fundamental data quality issues. We looked at common definitions and consistent reported values of key metrics across departments. On the positive side, 23% get it right all the time. 50% of retailers have consistent data more than half of the time, but on the negative side 28% get it right less than half of the time.

Root Causes: Data Inconsistency and Data Silos

23%

26%50%

2%

1 - Always 3 - Half the time2 - More than half the time

4 - Less than half the time

How often do different departments use the same definitions for key business metrics and see the same values in one department’s reports compared to all the rest?

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Sponsored by DXC |

Retailers On Average Pull Insights from 30 to 37 Different Operational Databases!

How many different operational databases/platforms are used at your organization?

What percentage of your organization’s current data would you estimate is considered actionable and accessible?

0% 0%Less than 10 None10 - 24 1% - 24%25 - 49 25% - 49%50 - 99 50% - 74%100 or more 75% - 99% 100%

120

100

80

60

40

20

0

100

90

80

70

60

50

40

30

20

10

0

45%10%

45%

34%

32%

16%0%

9%

6%

Additionally, 60% of the average retail organization’s data is not actionable or accessible.

http://www.idc.com


Sponsored by DXC |

Digital transformation is driven by actionable insights, quick and informed decision-making, and agile operations. Scarce talent can’t be wasted on data wrangling. Leaders take their advantage in all of these areas.

To digitally transform data utilization and realize the value of your data:• Establish automated processes to ingest and analyze data from all channels• Drive actionable insights into processes and customer engagement strategies• Remove obstacles including data and analytics staffing / training, data integration/integrity and other

legacy business process issues

Conclusion

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Appendix: DemographicsHow many stores does your organization operate in both the US and/or Canada and globally?

What type of retailer is your organization?

Specialty 16%

General merchandise

50%

Home improvment

7%

Apparel/Fashion

27%

In what country is your organization?

Canada 16%

United States 84%

239

222

301

Outside of the US and/or Canada

Canada

US

Majority in the US with global operations

50% in general merchandise followed by apparel and fashion

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Sponsored by DXC |

Appendix: DemographicsWhich of the following best describes your

responsibility and decision-making role in the Digital Transformation (DX) strategy for your organization?

Makes the decisions 16%

Part of a team that makes

the decisions 28%

Primary decision maker 69%

What was your organization’s revenue in 2016?

$10 billion or more 7%

$5 billion to $9.99 billion

10%

$2 billion to $4.99 billion

24%

$1 billion to $1.99 billion 32%

$500 million to $999.9 million

27%

How knowledgeable are you regarding your organization’s

retail operations?

Not knowledgeable

16%

Very knowledgeable

82%

Mean revenue of respondents at $2.9B

and 82% very knowledgeable on retail operations

http://www.idc.com

an idc infobrief, sponsored by dxc | january 2018 · added through e-commerce channels. but look at...

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